Activist fails to nominate director to CIB Marine

Robert Clutterbuck, the activist shareholder who planned to nominate his own director at Waukesha-based CIB Marine Bancshares Inc., has not moved forward with his plan after all.

Due to what Clutterbuck described as a technicality, he was not able to validly submit his preferred director, Boyd Watterson Asset Management Co. chief financial officer Patricia Jamieson. He indicated in a letter to some shareholders last month that he planned to do so.

Clutterbuck is managing partner at Cleveland hedge fund Clutterbuck Capital Management LLC, which is one of CIB Marine’s largest investors. The company owns a “significant” amount of series A and series B preferred stock and also some common stock. That stock is registered in its broker’s name.

“It turns out, to be able to have standing to nominate someone to the board, that stock had to be pulled out and registered in our fund’s name, separate,” Clutterbuck said.

While firms sometimes waive this requirement, Clutterbuck said his request to CIB Marine to waive it was denied.

CIB is the parent company of Marine Bank in Wisconsin and other banks in Illinois and Indiana.

“Bob Clutterbuck did not submit a valid slate for nomination is what it basically boiled down to,” said Mark Elste, chairman of the board of CIB Marine. “I’m not going to comment on why he did it that way or why he didn’t do it that way.”

Elste said Clutterbuck Capital and CIB Marine are in a continuous dialogue. This attempted nomination hasn’t changed the board or leadership’s strategy as it relates to managing the bank, he said.

While CIB Marine struggled during the Great Recession, was under a cease-and-desist order from regulators for a time and went through Chapter 11 bankruptcy, it is now on the other side and ready to grow again, Elste said. It completed a reorganization in 2010, and de-listed its stock in 2012.

Last year, CIB’s board elected a new chief executive officer, Brian Chaffin and a new chairman, Elste, to replace retiring interim CEO and chairman John Hickey. Since then, the company has announced a cost reduction strategy that is currently underway and aims to reduce costs by more than $1 million per year through office closures and layoffs.

“We have successfully, as an organization, navigated our way through that morass and come out in good shape,” Elste said. “We are well capitalized.”

He pointed to higher earnings, loan growth and asset growth as signs of good management. CIB Marine reported first quarter net income of $952 million, or 3 cents per diluted share, up from $26 million, or 0 cents per share, in the first quarter of 2015. Loans totaled $470.4 million at quarter end, up 21.7 percent from the same period a year ago.

Clutterbuck, for his part, says that’s not enough. The bank’s return on assets and return on equities have been substandard when compared to peers, he said. CIB Marine’s return on average assets for the first quarter was 0.66 percent, compared to 0.02 percent in the first quarter of 2015

He has advocated for a sale of the bank to drive shareholder value, and he has also questioned the board and management’s level of compensation.

“There is no emphasis from the board and no push from the board on demanding even average performance, much less superior performance,” Clutterbuck said. “We think this is another example of them caring about preserving their jobs rather than performance for the shareholders.”

Elste says Clutterbuck is trying to get the organization to redeem his noncumulative, perpetual preferred shares.

“I think it’s fair to say Mr. Clutterbuck wants cash,” Elste said. “If you want cash and there’s no market for your shares, then you’ll do almost anything to get cash.”

CIB Marine has recommended shareholders vote to re-elect three of its directors: John Hickey, Jr., Charles Baker and Brian Chaffin. Those are the only directors who were validly nominated in time for its May 26 shareholder meeting.

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Molly Dill, former BizTimes Milwaukee managing editor.

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